June 4, 2013 / 9:36 PM / 6 years ago

UPDATE 1-Brazil hikes farm budget, warehousing a priority

* 2013-14 budget jumps a fifth as output rises

* Investment in warehouses to ease logistics jam

* More cash for crop insurance, irrigation (Adds quote from President, Brazil farming overview, links)

By Peter Murphy and Jeferson Ribeiro

BRASILIA, June 4 (Reuters) - Agricultural powerhouse Brazil increased its farm budget for 2013/14 by nearly a fifth on Tuesday to 136 billion reais ($64 billion) as its farming sector thrives, and it earmarked extra cash to expand badly needed warehouse capacity.

The annually-revised farming budget has grown about six-fold in a decade, keeping in step with rapid expansion of production in the world’s No. 1 producer of coffee, sugar and orange juice and major producer of soy, corn and beef.

Most of the annually revised budget involves loans to growers at subsidized interest rates to cover production costs, which are repaid months later after crops are sold. It also allocates funds to subsidize crop insurance and low-carbon farming techniques.

“If all of this is spent, and there’s a shortage of funds, we will add to it ... Spend it all and you will get more,” said President Dilma Rousseff, to cheers and applause from farming representatives at the ceremonial announcement of the budget.

A major food importer just a few decades ago, Brazil has invested heavily in scientific research to adapt crops to its soils and climate. Productivity of key crops like grains and coffee has soared and crop exports are now nearly $100 billion.

While output has surged, neglected infrastructure is now stretched to the limit with a lack of warehousing capacity, clogged ports and a shortage of trucks in a country reliant on expensive road transport to haul crops long distances to port.

Agriculture Minister Antonio Andrade announced the government would allocate 25 billion reais to finance construction of new warehouses over the next five years. Brazil had record corn and soybean harvests this season.

The government also sees boosting storage capacity as a way to rein in a recent spike in food inflation. By keeping reserves on tap, the state can make strategic sales or purchases and try to influence prices.

The minister said subsidized interest rates for loans made under the budget would average 5.5 percent annually. Lending specifically for investments in farm equipment, irrigation and storage would enjoy rates of 3.5 percent a year.

Cash allocated for subsidizing the cost of contracting crop insurance was also hiked to 700 million reais, up from 400 million last year. The government wants to increase insurance to avoid bankruptcies for farmers hit by weather calamities that in the past have forced some to drop out of farming altogether.

Lending for investment in irrigation was also boosted to 400 million reais, following one of the worst droughts in history in Brazil’s northeastern region. The drought has killed off thousands of cows and slashed output of some crops, including sugarcane.

Katia Abreu, head of Brazil’s main farming lobby, the CNA, said planned new railways, highways and waterways, still a few years off at least, would eventually divert the flow of most crop exports to northeastern ports from the south, cutting sea voyage times.

Brazil will announce a separate budget destined for small-scale producers who produce the bulk of Brazil’s domestically-consumed food supply on Thursday.

Additional reporting by Jeferson Ribeiro; Writing by Peter Murphy and Reese Ewing; Editing by Marguerita Choy and Bob Burgdorfer

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